One of the rarities in life is finding a person who can write financial satire, embraces critical thinking and has an astute knowledge in economics. Rasputinlives at Prudentbear forum is that rarity. Recently, Rasputin has been posting what is termed as the "Raspedia ", which covers our current economic malaise and then some. If this doesn't wake you up out of your financial stupor, nothing will...
Rasipedia Update #11, October 10th 2008:
1. October 10th: Japan's $2.7 billion insurance company. Yamato Life, failed outright. Of course, any time I hear of ANY insurance company being in trouble these days, my rat-like Rasputin nose starts twitching, trying to sniff out whether they were deeply ensconsed in the drunken derivatives orgy. Since Yamato was a private company it is more difficult to discern what brought them down, but suffice it to say that I doubt it was mass hari-kari by their life insurance policy holders which was sure to happen as the collapse continues). Rather, it is my sense that they were probably caught up in the fever of selling CDS "insurance" because the so-called "profits" were just too lucrative.
2. The Wall street Journal is reporting this morning that the U.S. is considering removing ALL limits on deposit insurance at ALL banks, literally offering an "Infinite Fiat" backstop to the entire banking system, as found here:
What will they think of next? Guarantee all stocks too?
To that I say: "Yipeee! Ponies for everyone!"
Furthermore on this subject, I'm sure that after today's G7 "Champagne and Caviar" fest in Washington is finished, you will see a joint announcement from ALL of the panicked G7 goons that they will be insituting similar "Infinite Fiat" backstops for their failed financial systems.
And why not? It's only electronic digits right?
The only reason I can think of for this unprecedented (a word that has lost all meaning and impact at this point) move is to try to stop all the terrified little "Rasputin-types" from continuing to pile into U.S. Treasuries and to herd them back into the failed financial system.
All I can say is: "Good luck" because I wouldn't put any fiatscos in any bank anwhere in the world, even if they were paying 20% APR interest.
3. (Ras note: This particular update point should have been posted in yesterday's Rasipedia Update #10, but frankly I completely forgot to include it. Oops, my bad!): October 8th: The Treasury Department announced a "technical correction" that would allow them to backstop additional money market funds under Treasury's "Temporary Money Market Fund Guarantee Program". (Please see section 6:"All government and central bank efforts...", Point 18.)
I don't understand why Treasury considers this move necessary because the Federal Reserve has ALREADY backstopped the entire $4 trillion money market sector with two separate programs (first the "non-recourse loans" against failed ABCP, then the blowing off of any pretense of "collateral" with their latest move to offer loans to any failed gambler in the entire commercial paper market--which backs much of the money market funds), but what do I know? I'm just a lowly little "Collapse Chronicler". So, there must be some logical reason for this but for the life of me, I can't figure it out.
4. The ECB is offering banks "unlimited cash" (which sounds a LOT like "infinite fiat" to me) Please see Section 7:"Other countries efforts...", Point 13).
Hmmm, is the Eurozone experiencing a bank run? LOL. Whoda thunk it? Does this mean that the fiat/fractional reserve/central banking/securitization/derivatives model might be a tad..."unstable"? LOL.
5. Iceland froze trading on their stock exchange for two days. (Please see section 7, Point 14.)
Heh, "Iceland froze"...man, am I funny or what? Anway, once again we see that the Derivatives Beast was nurtured in every nook and cranny of the global financial system, including little insignificant countries buried in snow, and is now consuming all the gamblers in a fiat conflagration. Just goes to show you that the urge to gamble is a universal human condition and even infected formerly staid old bankers.
(Additional Ras Note to the above point: Please understand that at this point, most governmnets and central banks have crossed the line into literal "Infinite Fiat" backstop offerings to their banking and financial systems. This renders any attempt try to keep track of the total number of fiatscos flung at this epic, systemic collapse impossible.)
6. Finally, today is "D-Day", or rather "CDS Day" as all the failed financial gamblers try to obscure and hide how many of the sellers of "insurance" are really bankrupt and can't pay their equally-as-scroomed counterparties. And, given that mainstream media is reporting that approximately 400 billion fiatscos are supposed to change hands today, I will predict that the REAL number is probably trillions.
Needless to say, the gamblers don't have the fiatscos to hand over, which might just explain the systemic, global, synchronized, massive, unprecedented-by-any-measure-or-metric financial system collapse.
Now, onto the Rasipedia:
UPDATED RASIPEDIA (10-10-08):
Table of Contents:
Section 1: Layman's explanation of the systemic, worldwide financial collapse
Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse
Section 3: What will happen even though the "Hanktator Act" was enacted.
Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"
Section 5: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector
Section 6: All government and central bank efforts to date to combat the systemic global financial institution collapse
Section 7: Other Countries' Efforts to Fight the Financial Collapse:
Individual Sections of the Rasipedia:
Section 1: Layman's explanation of the systemic, worldwide financial system collapse
Layman's explanation of our situation:
1. The current "Ponzi Pyramid of Death" monetary system is crumbling.
2. Right now, virtually every single large bank, medium-sized bank, hedge fund, pension fund, mutual fund, money market fund, stock broker and insurance company on the planet has failed or is failing. All the trillions of dollars phony paper they have been trading back and forth is virtually worthless.
3. Somewhere between $10-$20 TRILLION (estimates are hard to make due to the opaque nature of the derivatives markets) in debt and derivatives "value" has been wiped off the books of the above-mentioned players.
4. The players are failing left-and-tight. ALL of the biggest, oldest Wall Street banks, plus the largest insurance company plus the two largest mortgage companies (Fannie and Freddie), plus the entire money market, plus the largest S&L (WaMu) and the fouth-largest bank (Wachovia), all failed in the span of three weeks. The rest of the thousands of institutions worldwide were also mortally wounded and are now toppling over, en masse.
5. Governments and central banks worldwide have already pumped approximately $6 trillion collectively into the failed financial system to date to fight this systemic, sychronized, worldwide, complete, utter collapse. So far, their efforts have failed.
6. At this point, the fight will continue to the death. During these next few weeks, months, and even years the "economic convulsions" between the "Ponzi Pyramid" debt collapse destruction-deflation and government and central bank reflation/monetization/nationalization efforts will rage, with the back-and-forth battles getting wilder and wilder, until:
7. The entire world will plunge into a final financial demise, with the people of all the nations suffering mightily. "Great Depression II" will ensue for the next five to ten years.
8. During this time, if the world doesn't blow itself up in all the wars that will surely follow, tens of millions of people in the U.S. are going to learn to fear debt and living beyond their means. This is a good thing.
9.Eventually, hopefully, the U.S. pulls through in one piece, the people's stock, bond, and housing assets are decimated, many have lost their jobs, but we all learn discipline, humility and sobriety and as a result, our national character grows.
10. We emerge as a chastened and humble nation, and so do the other nations who have contributed to this Ponzi Pyramid of Debt and Derivatives Death". Exactly what we need.
Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse
In order to help put into context the rapidly-moving events surrounding this systemic worldwide financial collapse, below is a timeline of the "Fannie/Freddie Big Bang" that touched off the derivatives implosion, which is why so many instituions failed simultaneously, worldwide.
Timeline of "Fannie/Freddie Big Bang" CDS implosion, leading to current total, systemic, global financial collapse:
1. September 7th, 2007: Treasury takes over the failed Fannie and Freddie and FHLBs.
2. September 7th, 2008: All counterparties to the multiple tens-of-trillions of fiatscos of CDS positions are instantly thrown into chaos since many of these OTC private contracts are poorly documented and the gamblers are poorly capitalized and unable to pay up on the bets. (Many players immediately start failing that very week).
3. September 8th, ISDA issues an emergency press release confirming that there are huge (but undisclosed) amounts of CDS trades outstanding on Fannie/Freddie debt. ISDA urges emergency conference call with Federal Reserve New York in attendance be undertaken immediately. The call takes place that very morning.
4. September 8th to present: The failed gamblers scramble to construct a list of the failed trades.
5. September 16th: The Fed, feds, and ISDA step in and try one last ditch attempt to make a market in all the destroyed derivatives positions during the emergency "ISDA Sunday Swap Meet", which is a complete, abject, utter failure
6. Immediately after this failed "Sunday Swap Meet", the following players instantly are ruined (but not all topple over immediately) :
a. Lehman Brothers
b. Merrill Lynch
d. Morgan Stanley
e. Goldman Sachs
f. (Update): WaMu topples less than three weeks later
g. (Update): Wachovia bit the dust exactly three weeks later
And the Grand Total of just the top financial institution failures so far:
1. Fannie Mae failed ($2.5 tril.)
2. Freddie Mac failed ($2.5 tril.)
3. FHLB system failed ($1.3 tril)
5. Merril failed ($800 bil.)
4. Lehman failed ($700 bil)
5. AIG failed ($500 bil. in CDS)
6. Goldman Sachs effectively failed ($2 tril)
7. Morgan Stanley effectively failed ($1.5 tril)
8. WaMu failed ($300 billion)
9 Wachovia failed ($800 billion)
Sub Total: Approximately $13.1 trillion
(And now the simultaneous collapse of virtually ALL of Europe's biggest banks, followed by the unprecedented move to nationalize all the fallen financial freaks by the European governments. Please see:Grand Total ALL Reflation/Nationalization/Monetization Costs to Date,worldwide )
Time-frame for this epic collapse of virtually every major financial institution in the U.S. AND now Europe:
Less than four weeks,
...which clearly is a record.
However, that's not all: also vaporized were virtually every:
1. Hedge fund
2. Pension fund
3. Insurance fund
4. Mutual fund
5. Money Market funds, both in the U.S. and in all other major countries, worldwide.
Sub Total: Who knows? Probably trillions more
ALSO crushed, and even more dangerously so:
1. Some percentage of the $62 trillion credit default swaps market (Ras Note: Immediately after the "Fannie/Freddie Big Bang", ISDA began reporting that the swaps market was $54 trillion instead of the former $62 trillion--$8 trillion in positions evaporated--and offered NO explanation for this stunning drop.)
2. Some percentage of the $650 trillion overall derivatives markets
(Ras Note: As of October 10th, The ISDA is holding auctions to try to determine the extent of the damage to the CDS derivatives space. As mentioned above, $8 trillion in CDS positions have magically disappered--coincidentally at the exact moment that Fannie and Freddie failed. In any event, the gamblers are trying to figure out a way to settle up their failed positions, but since so many of them are bankrupt, clearly this process is not going well. We should know more after today's Lehman Bros. CDS debacle is done.)
Sub Total: Who knows? I don't even want to guess anymore.
Section 3: What will happen even though the "Hanktator Act" was enacted
Now that the Hanktator Act has been officially passed, I am modifying my predictions for what will happen going forward--even though at this point it's anybody's guess as to what the heck will take place next in this insane economic environment.
1. Perhaps there won't be any immediate runs on the banking system since FDIC was just given NOT ONLY the authority to cover all accounts up to $250k, BUT ALSO an infinite line of credit with the U.S. Treasury to guarantee all $6-plus trillion fiatscos in deposits.
2. You can bet that the Federal Reserve will be the first one lined up at Treasury's window to start trading in the half-trillion or so fiatscos worth of totally dead assets it took on its balance sheet from failed financial institutions around the world.
Taken on by the Fed, I might add, in order to keep the collapsed financial system from dragging down the rest of the so-called "real economies" in a cascading series of cross defaults.
Whether the Fed removes this toxic waste from their own coffers by a "Two-step" process (handing the trash back to the failed financial firms, who then pass them right along to Treasury), or directly with Treasury isn't important; the bottom line is the Fed is gonna be made whole. Yet the Fed may still wind up being a player in this little charade, as outlined below.
3. Perhaps McMansion prices will just continue on in a gentle downward slope instead of immediately collapsing 70% from present levels as they would have, had the Hanktator Act not been passed. With all the foreclosure forebearance provisions snuck into this bill (with more surely to come in the next bill), homedebtors should be able to enjoy luxuriating in a 5000-square foot stucco-siding-and-granite-countertops box without making ANY payments ever again.
4. And maybe--after the feds nationalize the U.S. auto industry too--they can start offering ten-year, no-interest loans to help keep the lambs purchasing gas-guzzling SUVs. It's in our national interest, you know...
5. Instead of millions of minions being thrown out of work, the federal government will now perhaps employ them cleaning the newly-restored McMansions, polishing all the cars soon to be sold, and shuffling all the paperwork created by the implementation of the Hanktator act.
6. However, after the immediate sell-off of all three stock indices once the Act was passed, I can't give any assurances that the sheeple's 401(k)/IRA mutual funds are gonna be protected from protacted contraction. But it's too early to prognosticate on this particular issue as I am quite confident that the feds will think of something to keep the lambs complacent in their little pens.
7. Now, this one is the "biggie": What happens to the U.S. fiatsco and the bond market? I dunno, but somebody's gotta step up and buy the trillions of fiatscos of debt that is gonna be created by Treasury in order to fund the resurrection of the failed financial system.
Will the Asian debt-enablers keep funding this insanity?
At the same low interest rates?
Or, will the Federal Reserve have to step up and fling some fresh fiatscos to buy the debt?
Again, it is too early to tell what will happen here, but we should know shortly because Hank has to immediately--within the next few weeks--start purchasing the dead "assets" from the failed insitutions in order to keep us from continuing to slide into "Great Depression II".
And he has to sell that debt to somebody.
So, for now, my only prediction is that...er...uh...oh heck I admit it:
I don't have a friggin' clue as to what will happen.
Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"
The four questions that were never asked during the Congressional hearings on the "Hankzooka Act" were:
1. Of WHAT exactly do all these instruments consist? (Categorically: MBS, CDOs/Squareds/Cubeds, CDS, other derivativtes)
2. Exactly WHO is holding them?:
3. WHAT are the actual, verifiable, CASH FLOWS on the instruments that the destroyed financial sector are trying to foist on the American taxpayer?
3.(a) WHAT is a reasonable estimate of the "worth" of these assets, based upon number 3 above?
4. WHAT "assets" has the Federal Reserve accepted in exchange for the fiat/Treasuries flung under the various "TAF-like" programs? From WHOM has the Fed accepted these "assets?" WHAT is the cashflow from these "assets?" At WHAT price did the Fed value these "assets"? Will the Fed be swapping these "assets" back out to the players with whom they did these deals? (And then will the players be dumping these assets onto the Treasury under the "Hanktator Act"?)
(Ras): Four simple questions. The truthful answers to which would instantly collapse our entire economy and financial system even more so than it already has, because the truth is just too ugly to reveal.
Which is why we haven't heard them asked, nor will we hear them answered.
Section 5: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector
The Fed's unprecedented move to backstop all Money Market funds:
First, a link to the Fed's "Interim Final Rule" on their loaning to the failed financial institutions enough fiatscos to try to revive the moribund ABCP scheme:
But we''re not desperate or anything. We just thought we''d do this outta the blue, on a Friday morning, because we weren''t very busy
Now, the KEY phrase from this document is this (with my emphasis added):
"To reduce liquidity and other strains being experienced by money market mutual funds, the Federal Reserve System adopted on September 19, 2008, a special lending facility that enables depository institutions and bank holding companies to borrow from the Federal Reserve Bank of Boston on a NON-RECOURSE basis if they use the proceeds of the loan to purchase certain types of asset-backed commercial paper (ABCP) from money market mutual funds (ABCP Lending Facility)."
Did you catch that part about "non-recourse"?
Do you know what that means?
Well, it means that when--not if--the ABCP the institutions hand the Fed in return for freshly-flung fiatscos goes bad, then THE FED WILL JUST EAT THE LOSS AND NOT, I REPEAT NOT, TRY TO RECOVER THE FIATSCOS FROM THE INSITUTIONS!!!
Section 6: All government and central bank efforts to date to combat the systemic, global financial system collapse
Government and Central Bank efforts from March, 2008 to present to fight the financial Collapse:
The sum, fiatsco-wise and in terms of actual actions, of the efforts of the various TPTB branches to fight the debt destruction convulsions and the related costs incurred to do so (so far) is presented below.
Federal Reserve efforts undertaken to fight the credit collapse:
1. Dropped Fed Funds rates 325 basis points, some of these moves being surprise rate cuts.
2. Also pounded down discount rates by similar amounts and means.
3. Created unprecedented, even borderline Constitution-contravening, now-trillion fiatsco TAF, TSLF, PDCF,"Fed,LLC", "Fed, AIG", "Fed Euro-swap" programs Then, extended time-frames, amounts and frequency of many of those programs.
4. Instituted the stunning "Fed-FDIC" program on Friday, September 19th, whereby the Fed backstops ALL money market funds (total fiatsco exposure amount: over $4 trillion by itself), accepting worthless ABCP paper with NO-RECOURSEto try to stop a run on the funds by panicked bagholders.
5. Accepted hundreds and hundreds of billions (and now perhaps trillions) of fiatscos of totally dead "assets" from failed Wall Street firms and will not disclose what those "assets" are, nor from whom they were accepted.
6. Offered JPM "sweatheart $75 billion loan" as part of Lehman liquidation (probably to square up some failed CDS positions)
7. Suspended "Rule 23(a)", allowing commercial banks to fling fiatscos to their failed investment banking arms
8. Began outright purchases of Agency debt on Friday, September 19th
9. Allowed Goldman Sachs and Morgan Stanley to--with no waiting period--change from investment banks into commercial banks. Changed "rules" so that Morgan Stanley can continue to perform investment banking functions. Changed the "rules" regarding minority ownership of these giants
10. Did a special $25 billion "TAF" to Goldman and Morgan
11. Raised "SOMA" account credit limits by 25% from $3 billion to $4 billion
12. In an unprecedented move, on September 29th, the Fed committed to injecting $630 BILLION in "liquidity" into the world's financial system. This injection took the form of increased "TAF-like" injections (also extended in duration) as well as MASSIVE "Fed Euro Swap" injections--probably to help fight the collapse of all the European institutions that are stuffed to the gills with bad paper sold to them by Wall Street.
13. Announced, on October 7th, that the Fed will be acting in concert with foreign central banks to extend the size and duration of the previous "TAF-Like" program.
14. In a move that can only be decribed as "Crossing the Rubicon" the Fed, for the first time ever, announced on October 7th that it will create an "SIV" and directly loan fiatscos to corporations that participate in the commercial paper market. NO "collateral" is even necessary for the players to borrow from the "Fed SIV". Furthermore, NO limit to the amount of fiatscos provided by the Fed was announced. However, not even this ground-breaking, breath-taking step taken by the increasingly-panicked Fed lowered LIBOR rates. In fact, LIBOR rates actually ROSE on the day of the announcement.
15. On October 8th, The Fed pumped an additional $38 billion into AIG, raising the total to an astounding $123 billion so far. This latest, massive, injection coincidentally was made just twenty-four hours before the ISDA's scheduled auction to settle perhaps as much as hundreds of billions of fiatscos of failed CDS positions. AIG is reported to be sitting on $500 billion-plus in CDS "insurance" they sold to counterparties.
(Total liquidity/reflation/monetization effort costs on the part of the Fed):
Now multiple trillions of fiatscos, and no sign of let up, since they have proven they are willing to fling fiatscos in all directions to prop the money market funds and other failures. So don't for a minute believe that the Fed (or other central banks) are anywhere near throwing in the towel.
(Ras): That is one impressive list of accomplishments by the Fed in their battle against the debt destruction convulsions. Breaking all previous rules, precedents and protocols, the Fed is well on its way to playing out Bernanke''s promised "Roadmap to Weimar" as laid out in his famous 2002 speech:
"Deflation: Making Sure it Doesn't Happen Here".
However, these massive stunning, creative, and even nefarious moves on the part of the Federal Reserve don''t represent the total effort by TPTB to stave off economic collapse.
Far from it.
Next we will focus on the Treasury/Administration/SEC/FDIC gang's efforts and see just what rabbits they have pulled out of their collective hats. Trust me, they have produced an entire litter of "reflation bunnies" in their attempts to keep this collapsing system intact.
And here they are:
1. Congress proffered "Economic Stimulus Checks for Sheeple" program of $150 billion
2. Treasury floated various failed "Super SIV" programs before turning to the "big gun" efforts described below
3. Treasury (Hank Paulson) demanded, and received, from Congress an $800 billion (so far) "Bazooka" to nationalize Fannie, Freddie, FHLBs
4. Within six-weeks, Hank used that bazooka to take over the GSEs, injecting an initial $200 billion into these fallen frauds and also instituted a Federal Reserve-like function of monetizing GSE MBS. Also, offering "liquidity" for MBS
5. Treasury pulled off two emergency funding Treasury auctions totalling $200 billion to give Federal Reserve more ammo to fire at collapsing financial institutions worldwide
6. Treasury demanded "Hanktator" emergency legislation from Congress, giving Treasury literally dictatorial powers over the entire financial system. Further demanded authority to keep shuffling dead assets from Wall Street banks into government (and taxpayer's) lap
7. Treasury/FDIC/SEC arranged "shotgun weddings" between failed Wall Street banks, commercial banks and major mortgage originators
8. On Friday,September 19th., Treasury announced they were turning the GSEs loose to once again start snapping up dead MBS from the failed financial system
9.The FDIC quietly allowed banks and S&Ls to practice "foreclosure forebearance" which gives these failed institutions the authority to pretend that all their deadbeat real estate loans are "performing". Also, have quietly shut down or married off failed banks (And are just beginning this last effort, with perhaps thousands more to go.)
10.The SEC ruled that "Short-Selling Seditionists" are a financial threat and released a 799-member "untouchable" list of failed financial institutions which cannot be shorted. This action came after a smaller version of same was instituted in July. Have continually added to this list, including many non-financial stocks
11. The FDIC arranged an unusual THURSDAY NIGHT takeover of WaMu, dealing off its deposits to JPM. Additionally, and no surprise at all, WaMu's derivatives positions were also transferred to JPM
12. FDIC decided that the collapse of WaMu did NOT constitute a "Credit Default" therefore no CDS payments need be triggered. This is a HUGE event because the FDIC just basically negated ALL CDS contracts, in my opinion.
13. On September 29, the FDIC authorized that Citi take over the failed Wachovia. And, in what is becoming par for the course, Citi was allowed to "cherry pick" Wachovia's deposits and some of the debt, and the rest of the rotting carcass will be strewn across the backs of the taxpayers to be carried like so much rotting meat, similar to the recently-failed WaMu.
And who knows what further CDS bombs were set off by this latest failure of one of Wachovia, which is the world's largest financial institutions? My sense is that Wachovia's collapse was "not helpful" to the already devastated credit default swaps market in particular and the whole derivatives space in general.
14. ON September 30th, in yet another stunning move by the increasingly-desperate TPTB, the SEC and FASB decided to make it even easier for the failed gamblers holding dead, toxic "assets" to completely abandon any and all pretense of "mark-to-market" and just allow the mortally-wounded institutions to literally make up any "value" for these "assets" they deem necessary to shore up the ol' balance sheet.
The SEC and FASB offered a press release, found here:
But Rules are for little taxpaying sheeple, NOT big, failed, Wall Street gamblers.
...whereby they explain that it is perfectly okay for the destroyed financial institutions to simply make up whatever valuation they desire for the trillions of fiatscos worth of dead, rotting "assets" currently stuffed in the dungeons of their balance sheets.
This latest desperation move is obviously intended to obscure the massive, multi-trillion fiatsco losses which have crushed the gambler's corrupt enterprises until the Hanktator Act can be passed and these rotting corpses can be laundered through the new entity.
15. The SEC has extended the "Anti Short Selling Seditionist" emergency rule has been so successful in fixing all stock, bond, currency, debt-derivatives problems that they are extending it for another few weeks or so. Sheesh, and to think TPTB could have saved themselves all this heartache and stress of having to take the OTHER thirty or so unprecedented, emergency actions if they just would have implemented this one simple rule up front. Whod'a thunk it?
Oh well, better late than never I say.
16. IRS rules were changed to make the deal more palatable tax-wise for Wells. Here is the actual ruling:
"For purposes of Code Sec. 382(h), any deduction properly allowed after an ownership change of a corporation that is a bank with respect to losses on loans or bad debts, including any deduction for a reasonable addition to a reserve for bad debts, shall not be treated as a built-in loss or a deduction attributable to periods before the change date. This guidance does not affect the application of any provision of the IRC except Code Sec. 382. Banks may rely on this guidance until further guidance is issued."
...which, according to calculatedrisk blog, allows Wells to accelerate the tax write-offs associated with absorbing the failed Wachovia's "assets".
17. The Treasury is allowing Fannie and Freddie to buy FHLB MBS. I'm not sure why they are doing this since all the GSEs have been effectively nationalized, but there must be some nefarious method to this madness.
18. October 8th:The Treasury Department announced a "technical correction" that would allow them to backstop additional money market funds under Treasury's "Temporary Money Market Fund Guarantee Program". According to Treasury, MMFs that have a "policy of maintaining a stable net asset value or share price that is greater than $1.00 and had such policy on September 19, 2008" are now eligible to participate, provided the fund meets all of the other original requirements, which basically translates to: they haven't folded up shop yet.
So, once again we are witnessing the complete and utter blowing off of all previous laws, regulations and precedents as TPTB becomes increasingly desperate to fight the systemic financial collapse that is consuming the world.
And please don't make the fatal mistake that these guys are anywhere NEAR finished in this epic battle. They have only begun to fight. And I can hardly bear to contemplate what they will do next, so I won't at this point.
(Total nationalization/stimulus/reflation effort costs on the part of Treasury):
Estimated $2.3-plus trillion so far, with open-ended commitment going forward.
(Ras):Once again I have to confess pure,unbridled shock and awe at the impressive array of weapons that this particular branch of TPTB has amassed--and used--in their battle against the evil forces of deflationary debt collapse convulsions.
Yet, despite outlining the above massive and unprecedented steps taken, we''ve not yet completed our quest to document all TPTB''s powers and programs undertaken to date.
Let us do so now:
1. Passed the proposed $150 billion "economic stimulus" program suggested by Treasury/Administration
2. Passed the "Save the Homedebting Sheeple Act" with an estimated cost of $300 billion (but will surely be much more)
3. Then tacked on the "Bazooka" provision to allow Treasury to nationalize Fannie/Freddie for another $800 billion (so far)
4. passed the afore-mentioned "Hanktator" act, giving Treasury unprecedented dictatorial powers over the failed financial system and perhaps multiple-trillions of fiatscos to do so.
so that we can buy ourselves a few more weeks or months worth of reprieve before "Great Depression II" continues unabated.
5. Just passed $25 billion aid to auto manufacturers
(Total stimulus/reflation effort costs on the part of Congress, avoiding double-counting costs already attributed to Fed/Treasury above):
$300 billion to $1 trillion.
(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, U.S. only):
Approximately $ 6 trillion. So far.
Section 7: European Efforts to Fight the Financial Collapse:
In addition to the nationalization of Northern Rock in 2007, Europe has been in a mad scramble to try to revive their equally-as-collapsed-as-the-United states'. financial system. Virtually every single big bank throughout Europe in the last week.
And the governments have responded with unprecedented moves to nationalize the broken banks.
1. Monday. September 29th Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate.
2.Belgium, changing their stance from a mere "liquidity injection" decided that nationalized Fortis, a 300-year odl institution that survived everything except the "Great Real Estate Bubble" of 2002-2008, was a better idea.
3. And a day later, a bail-out for Dexia took place.
4. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s.
5. The government of Greece folllowed Ireland and announced that it was guaranteeing all deposits in all banks.
6. On October 7th,Iceland's entire banking system failed. Russia stepped in and provided a five billion fiatsco injection to try to revive the Iceland banking system. Alas, but this emergency measure was to no avail. The Icelandic government had to step in and shut down all the banks and has announced they will nationalize the entire banking system.
7. Again, on October 7th, the Russians stated that they were pumping in thirty-six billion fiatscos into their failing banking system.
8. Spain revealed their version of the American "TARP", a fifty billion Euratsco fund to soak up dead "assets" from failed financial institutions.
9. Australia's central bank, in a surprise move, dropped their overnight funds rate by 100 basis points. Hong Kong followed shortly with a rate cut of their own.
10.On October 8th, the U.K. pumped the equivalent of 87 billion U.S. fiatscos into their failed banking system in a desperate attempt to revive their failed financial institutions. At least the U.K. was kind enough to their taxpayers to demand preferred stock which MIGHT one day pay some paltry dividend back to their Treasury--unlike the U.S. TARP plan, which will basically offer nothing to U.S. bagholding taxpayers.
11. Various halts to trading on indices around the world have taken place in the first week of October as stock indices crash upwards of ten-percent per day.
12.On October 8th, The People's Bank of China dropped their overnight lending rates twenty-seven basis points--sneaking in under the cover of the excitement generated by the massive, unprecedented, coordinated move by the Fed and other European (and the Canadian) to drop overnight lending rates fifty basis points. Not to be outdone in creating more fire to burn their currencies to the ground along with everyone else, On October 9th, the central banks of Hong Kong, South Korea and Taiwan also dropped their overnight rates twenty-five basis points.
13.On Oct. 9th, The European Central Bank is offering banks "unlimited cash" and pumped an unprecedented (there's that word, "unprecedented" again!) 100 billion fiatscos in overnight funds into the financial system. This latest panic move came the one day after an interest-rate cut failed to soothe tensions in money markets.
The ECB said it will lend banks as many fiatscos for which the failed gamblers can provide "collateral", which one can only imagine what the "collateral" consists of these days: Beanie Babies? Pet Rocks?
14. October 9th: Iceland's government froze (sorry for the bad pun, but I can't resist) trading on its stock exchange for two days and took control of the country's largest bank (the third one in a row). Whoda thunk that tiny little Iceland would be knee-deep in the derivatives hoopla and now has a banking system that is totally in tatters? I guess when one lives in a country that is freezing cold 9 months a year, what else is there to do than gamble?
(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, worldwide):
Best estimate: Tens of trillions of fiatscos pumped into or committed to being pumped into the system?
And even more as Europe's collective governments continue nationalization of their biggest banks.
Why even bother to hazard a guess anymore?